Who is Responsible for Solving the Rural Broadband Market Failure?

There is nearly no debate that the market for broadband internet has failed in rural America. Broadband, which is now defined by the FCC as 25 megabits per second (Mbps) download, is largely unavailable in rural markets. It is important to note that broadband is what the US government considers adequate service and remains the benchmark. Compare that to fiber optic internet, which can bring download speeds of 1,000 Mbps to users. In Virginia, largely southern and western portions of the state do not have access to broadband -- if any access at all -- which is interesting to consider given the commonwealth’s early involvement with the Internet at the Pentagon. The United Nations determined that access to the Internet is a human right, but even if we do not consider it to be in the US, there is no denying that internet access is economically beneficial to any community and close to necessary for basic living standards today.

Those who claim the Internet is not a right argue that any essential civic responsibilities, such as filing yearly taxes and voting, can be accomplished without the internet. However, most public schools require some level of access to the internet in order to do homework assignments in the present day. In 2009 (almost a decade ago), the FCC reported that 70% of teachers assigned homework that would require broadband access. Access to the Internet is becoming more and more necessary for day to day life, from the workplace to the classroom. It is easy to imagine a world in which internet access is a necessity for all; the day that happens, a large sector of the population will be left behind. In 2016, the FCC reported 34 million Americans lack access to broadband. It is important to note they are only measuring the ability to purchase a subscription from and internet service provider (ISP). The actual subscription rates are much lower because of other barriers to entry, namely cost. 24 million out of the 34 million without access are in rural America, and that number makes up nearly 40% of all rural Americans. Let that sink in: 40% of those living in rural settings do not have any access to broadband. 20% of rural Americans lack access to even 4 Mbps download speeds--that’s less than a quarter of broadband speeds.

Considering the costs of entering rural markets this data is not exactly surprising. Some suggest it would cost $80 billion to wire rural America to meet the threshold of broadband. There are other options on the table, one major one coming from Microsoft. They propose to use parts of the electromagnetic spectrum, which carries everything from radio broadcasts, to cellular service, to signals from a garage door opener. Microsoft reports this could cost as little as $8 billion, a staggering difference. Their plan could do quite a lot of good considering it would cover most of the country, giving access to the internet in many new places. With the rise of more and more technologies using spectrum based services and the need for more and more bandwidth to use the internet, this could be a short term solution to a long term problem. Spectrum connections are much less effective than those made through hard wires. With the benchmark increasing over time as technology moved from dial-up to DSL to cable and now to fiber optic, the solution that Microsoft is proposing could potentially make costs higher in the future to implement broadband in rural America.

Even the Trump administration is considering government subsidies to help wire rural America, something one would think he would oppose given his past positions toward free market policies. One could look to the last effort to wire America -- with the telephone -- to consider how it might be done best with internet access. However, when licenses to do business were issued in that case, the government required companies like Bell Telephone to wire less than profitable areas. Today, licenses to provide internet have already been issued and the ability to control where these ISPs expand is diminished. Combined with the sheer size and strength of the telecommunications lobby in Washington, and the possibility of forcing companies to bring internet to sparsely populated areas becomes even more distant.

The government does subsidize some telecommunications services, but these funds are relatively small and divided among multiple channels. The 1996 Telecommunications Act established the Universal Service Fund and mainly assists in bringing telephone service into new areas, including Native American tribal lands. Ultimately, the FCC has the responsibility, in some degree, to “encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans.” This Universal Service principle stated in Section 706 of the 1996 Telecommunications Act binds the FCC to ensure access to technologies like the Internet. Here, is some justification for the FCC to encourage ISPs to roll out broadband service to the 40% of rural America that has been left behind. This piece of legislation demonstrates the responsibility the FCC holds.

This is related to an extremely pressing issue, Net Neutrality. (If you aren’t aware of what Net Neutrality is, please read this article.) It could be argued that the FCC, if they decided to keep ISPs listed under Title II, could force these companies to expand into rural markets. While this would undoubtedly go to court, it is a distinct possibility given the control that the FCC has over what are deemed “common carriers”, which is where ISPs were listed under net neutrality. The critical vote on December 14th changed the control that the FCC has. The FCC repealed the Obama era regulation, which gives ISPs much more autonomy to change the internet as we know it, and would make getting rural America broadband access that much tougher.

The answer to how to fix the problem of rural broadband in America is not an easy one to find and ultimately is not clear. The decision to roll back net neutrality rules will without a doubt play a major role in the future of rural broadband. But even after the decision made in December, this issue will be far from resolved.

This article's cover image is licensed under CC0 Public Domain.